The Daily Forex Market Report

Good morning

The good news is the Dollar is pretty much on holiday from now until next Monday and it has gone into this break on the back foot.  The bad news is that yesterday’s Dollar weakness didn’t pull through to the Rand and we still find ourselves at R18.20, and with major moves in the currency market now unlikely for the next two days. 

These are the mid rates at 5:45 today:

Market News

• The Rand did manage a brief look at R18.08 to the Dollar yesterday morning after opening the session at R18.19 but this move stronger was quickly snuffed out as we fell back to R18.22, a level that we’ve been unable to improve on since. 
• With the Dollar Index on the slide yesterday it’s a little strange that the Rand wasn’t able to capitalise on this situation, and even stranger when taking an IMF report into account which seemed fairly positive on SA’s prospects.  The report did not shy away from our challenges but it acknowledged that our potential under a successful government of national unity could pave the way for a much improved economic outlook.  The report also gave a nod to the benefits of a lower inflation target should the SARB choose to go that route and February’s budget speech, which isn’t all that far away now, will become a hotly debated topic on whether a lower target is set to be announced. 
• The following is from the IMF report and underlines how we have a golden opportunity to turn things around: “South Africa’s diversified economy, abundant mineral wealth, flexible exchange rate, credible inflation-targeting framework, deep financial markets, and ability to issue domestic-currency debt are sources of strength. The fresh mandate of the GNU offers a historic opportunity to build on these strengths and pursue ambitious reforms to safeguard macroeconomic stability and address impediments to growth to achieve higher standards of living for all.”
• In keeping with yesterday’s strange price action the Dollar Index fell from 106.84 to 105.93 despite a barrage of US market data releases which all underpinned the strength of the US economy.  To name a few items, their weekly unemployment claims came in lower than expected, the second reading of their Q3 GDP performance remained steady at 2.8% and their PCE inflation report moved slightly higher, all headlines that would normally be associated with Dollar strength but not so yesterday.  One possible reason for Dollar weakness is the market ratcheting up its bets for a FED rate cut in December with chances now sitting at 70%, and as with all currencies the prospect of lower interest rates in the near future could be weighing on the greenback. 
• The following is from Reuters and suggests a more circumspect FED once we move into 2025:  The Dollar fell broadly on Wednesday in thin pre-holiday trade, digesting a slew of indicators that underscored US economic resilience while investors assessed the risk that President-elect Donald Trump will start a tariff war no one will win. “We all expected that inflation would pop up a little bit, but inflation is not getting out of hand. And that’s the key,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “This paves the way for a 25 basis point cut in December and then probably a pause. But the pause won’t likely be due to inflation data, but because of uncertainties over Trump’s tariffs. I think the FED will grow cautious.”
• Local market data today sees our October producer inflation reading at 11:30.
• Possible USD mid rate trading ranges in the Rand today are R18.10 and R18.40.

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